Market Commentary - May 16, 2022

The U.S. stock markets rallied on Friday as investors bought the dip after the S&P 500 avoided falling into a formal bear market. All three major indices were up on the day with the Nasdaq indices advanced 3.82%. However, such single day gain is unable to offset a broad decline throughout the week as both the S&P 500 and Nasdaq indices fell by 2.4% and 2.8% respectively, on a weekly basis. The overall prospects of the global stocks are dim at the current moment as it sank for a sixth consecutive week, with the FTSE All-World index on its longest weekly losing streak since the 2008 financial crisis, due to the normalization of the monetary policies from major central banks around the world which has in turn put pressures on stocks since the beginning of the year.

European equities have also advanced on Friday, closing highs for the first time in five weeks, also driven by groups of traders who’s trying to purchase the stocks at the current discounted prices which has took over worries on slowing global growth. All of the primary local indices gained over 2%, including the broad benchmark STOXX 50, which hiked 2.5%. Meanwhile, Turkey’s president Erdogan objected both Sweden and Finland’s NATO applications as he condemned the Nordic countries’ support the Kurdish militants whom Turkey considers to be terrorist.

Asian share markets rallied on early Monday morning after Wall Street stocks bounced back from deep lows on last Friday. However, such ascends seem to be fading away as the trading session continues with the HK’s Hang Seng Index dropped below 20,000 points to nearly a flat level. We shall see whether the afternoon trading session would resume the rally or not. Beijing on Sunday cut the mortgage loan interest rate further for some home buyers to prop up its property market, with the lower limit of interest rates on home loans reduced by 20bps for the purchase of first homes.

Oil prices were mixed on last week as Friday’s trading session closed, with the brent crude displaying a small weekly loss, while the U.S. WTI crude rose on strong summer demand bets and supply tightness that have pushed pump prices to record highs. Bullion continued its decline on Friday and made its fourth straight weekly decline, as the dollar continued its appreciation against a basket of majors. On the other hand, India, the world’s second largest producer of wheat, has banned all wheat exports over food security risk after a heatwave affected the crop, such moves could push up the global food prices further and exacerbate the famines among poor countries that relies on imported commodities.

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Figure 1 (Source: IS Prime) USD/CNH daily : Economic lockdown alongside expansionary policies saw flight in China's Yuan with fears that zero-COVID policy will persist.

Headliner to Review

  • In France, its CPI rose by 0.4% in April, in line with expectations. Price of energy dropped by 2.5% due to a decrease in petroleum product prices, and the price of manufactured goods has also slowed down.
  • The U.S. UoM Consumer Sentiment Index in May declined to 59.1 from 65.2 in April, as the newly released data on Friday has showed. This is the lowest figure since 2011 as persistent concerns over inflation made Americans more pessimistic on the economy.

Headliner to Watch

  • We have the U.S. monthly retail sales figures awaiting to be released on Tuesday, in which it is expected to rise by a solid 1.1%, possibly lead by the auto sales figure which is likely to lift the headline figure.
  • The eurozone Q1 GDP data is due on Tuesday as well, forecasted to grow by 0.2%, same as the figure from the quarter before.

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Authors:
Antony Tan
Kerry Man